FAQ

The Independent Benefits Council (IBC) is a not-for-profit organization formed in 2007 by four of Florida’s leading education groups — the Florida Education Association, the Florida Association of School Administrators, the Florida School Boards Association and the Florida Association of District School Superintendents. The IBC works on employee benefits issues for which a statewide approach would likely benefit public school employees and employers, compared with district-by-district action.

Together, these organizations represent the interests of more than 350,000 of the state’s teachers and education staff professionals. Projects of the IBC are only undertaken with the unanimous support of the four organizations.

Established by the IBC, the Model Plan brings together a set of preferred products for Florida’s school employees’ supplemental retirement savings within 403(b) plans. Investment products and the companies that provide them have been thoroughly vetted to ensure fairness and transparency in fees and costs, as well as high-quality performance and services. They are continually monitored to maintain these high standards and values.

Within the Model Plan, employees can invest in annuities, mutual funds, or a combination of both through multi-product accounts that combine these registered products. Participants can choose the product type that best meets their individual circumstances and investment preferences.

Mutual funds are professionally managed by regulated investment companies. Depending on a fund’s investment goals, it may hold stocks, bonds, short-term money market instruments or other types of securities. Mutual funds come with different levels of risk, volatility, and fees and expenses. Some funds are designed around when the participant wants to retire so that, over time, they automatically shift to include more stable investments (such as bonds) as retirement nears.

Annuities within the Model Plan include variable annuities and fixed annuities. An annuity is a contract with an insurance company. The company invests the participant’s monthly contributions during their working years and then makes payments to the participant during retirement — either for a certain time period (such as 20 years) or an indefinite time period (such as a lifetime).

Fixed annuities guarantee a rate of return on contributions for the entire time period.

Variable annuities do not guarantee a rate of return. The rate of return depends on the participant’s investment choice from among the insurance company’s options.

Multi-product custodial accounts allow participants to invest in mutual funds and similar products managed by regulated investment companies. Just as with mutual funds, these investments have different levels of risk, volatility, and fees and expenses. Custodial accounts typically give access to a wide range of investment options. They may be appropriate if participants are interested in closely managing their own investments.

In 2007, the IRS established new requirements for school boards and other public employers operating 403(b) plans for their employees. These stricter regulations, which took effect in 2009, ultimately led to school districts selecting long lists of investment options from more than 90 companies doing business in the state. School employees faced the difficult task of choosing among dozens of investment options for their 403(b) savings, many of which had high fees and low investment returns.

At the same time, because the school districts operate independently, they had no collective buying power. Public school employees were paying some of the highest fees charged to any segment of the workforce eligible for 403(b) investment — as high as 5%. Smaller districts may have been at a particular disadvantage in negotiating better rates, but all employees paid the price.

The IBC introduced the Model Plan in 2009 to:

Provide access to high-quality investment options at a fair price with no hidden costs,

Make it easier for school employees to save for retirement,

Meet the regulatory requirements for 403(b) plan investments, and

Use the districts’ collective buying power to get the right products at the right price.

The IBC brought together the leading statewide education organizations to develop a model program that would optimize supplementary retirement investment options for Florida’s public school employees.

Independent consultants hired by the IBC — aided by benefits managers from several school districts — evaluated the investment companies and products considered for the Model Plan.

Of the 90 investment companies operating in the state, 24 companies submitted detailed proposals in order to be considered for the Model Plan. These proposals included the types of investments that are allowed within 403(b) plans: annuities, mutual funds and multi-product custodial accounts that can include both these registered products.

Review of the proposals reduced these 24 companies down to a list of 11 companies. After in-depth interviews, the IBC’s independent investment consultant overseeing the search process presented a short list of eight companies to the IBC for final consideration.

At the beginning of 2008, the IBC selected five plans from this short list for exclusive membership in the Model Plan: American Century Investments, AXA, PlanMember Services, VALIC and Waddell & Reed received the IBC’s seal of approval for Florida 403(b) plans.

Since it was introduced in 2008, the Model Plan has undergone two changes. Waddell & Reed exited the Model Plan and was replaced by TIAA-CREF in 2011. The four companies originally approved in 2008 remain authorized members of the Model Plan.

In 2014, TIAA-CREF voluntarily exited the Model Plan, and the IBC authorized Security Benefit to provide mutual funds and annuities as part of the Model Plan.

The IBC also renewed Letters of Commitment with the four original Model Plan companies. Designed to ensure that employees continue to receive top value for their supplemental retirement investments, changes to these contracts included additional requirements for disclosures on fees and costs, as well as a new value pricing system.

The supplementary retirement options available through the Model Plan are vetted according to stringent criteria to verify that the authorized providers are offering fair and competitive rates, disclosing all fees and costs, and providing access to high-quality products and services.

Investment companies and their products are scrutinized for acceptance into the Model Plan according to seven criteria:

Expense charges

Investment options

Participant services

Company experience

Conversion and implementation

Administrative services

Account administration services

Additionally, all Model Plan companies are required to provide full fee disclosure for each proposed investment option and disclosure of any pending state or federal investigations or pending legal actions.

Each member company signs a letter of commitment to ensure the investment options offered to Florida educators meet the high standards set by the Model Plan, consistently throughout the state. This letter outlines all criteria and assures the company will adhere to them.

By signing the letter of commitment, the Model Plan companies pledge to:

Certify that they do not exceed the maximum pricing structure in any Florida school district.

Offer this favorable pricing structure to all districts, regardless of size.

Automatically upgrade plans when more enhanced products become available.

Ensure that representatives agree to sell only the products approved for the Model Plan (no bait and switch).

Provide a detailed plan to convert its existing contracts to the Model Plan, thereby creating immediate benefits for their current participants.

Guarantee rates for three years. IBC’s consultants regularly review financial data; if they find that a company’s proposed fees for subsequent years are excessive, the consultants may recommend eliminating the company from the Model Plan.

When the Model Plan was established, all companies currently offering 403(b) products in Florida’s school districts were invited to participate in the selection process. Some companies chose not to participate because they didn’t want to offer programs statewide, which is required by the Model Plan. Others felt their prices wouldn’t be competitive.

Ultimately, five companies earned the IBC’s seal of approval for inclusion in the Model Plan. These companies offer high-quality products and services at fair prices to 403(b) participants in Florida.

Potentially. This is an important feature of the multi-product custodial account. PlanMember Services and Security Benefit offer hundreds of different mutual fund companies through their investment portfolios. An employee’s existing investment is most likely is among them.

Each school district selects the companies and investment products for their 403(b) plan. In the past, this led to long lists of products that participants had choose from for their own supplementary retirement savings. Research shows that “choice overload” lowers an individual’s motivation to choose — especially among voluntary investment plans. By providing a prudent set choices, the Model Plan stands to make the investment choice less overwhelming and increase participation in 403(b) plans overall.

Model Plan was designed to give school districts an all-in-one solution for their 403(b) plans. Adopting the Model Plan exclusively gives school district administrators the confidence that their employees have access to Florida’s top supplementary retirement investment options.

If a school district chooses to add or maintain other providers excluded from the Model Plan, every effort should be made to require companies to meet the high standards set out in the Model Plan.

Yes. The Model Plan was adopted on January 28, 2008 and implemented by most Florida school districts during 2008. Today, 53 of the 67 Florida school districts have adopted the Model Plan for their supplementary retirement program.

The IBC supports all of Florida’s school districts in their adoption of the Model Plan, which complies with IRS rules and provides high-quality 403(b) products at low prices.

The IBC is committed to helping Florida’s public school employees save more for their retirement. If any additional changes to the Model Plan are required to ensure school employees continue to receive the best value for their retirement savings, the IBC will follow the same in-depth and comprehensive review process in making enhancements.

Also called a tax-deferred account, a 403(b) plan is a type of retirement savings plan for employees of tax-exempt organizations, including public schools. Similar to a 401(k) plan, the 403(b) allows you to contribute a portion of your salary to an employer-sponsored plan on a pre-tax basis. That means contributions are made before income tax is calculated, which lowers income taxes paid. The investment gains from these contributions also grow on a tax-deferred basis, so no income taxes are paid until the money is withdrawn as income from the plan.

There are many reasons to participate in a 403(b) plan, including significant tax advantages:

It is tax-deferred, which means you pay no current income tax on the money you contribute or on your investment earnings.

Since taxes aren’t taken out of contributions to your 403(b), the amount that goes into your savings account is typically higher than the reduction in your take-home pay.

Your 403(b) is portable: If you change jobs, your savings go with you.

Your supplemental retirement savings will help secure your financial future by filling in the gap between the income you can except to receive from the Florida Retirement System and Social Security and your actual retirement needs.

The Independent Benefits Council (IBC) is a not-for-profit organization formed in 2007 by four of Florida’s leading education groups — the Florida Education Association, the Florida Association of School Administrators, the Florida School Boards Association and the Florida Association of District School Superintendents. The IBC works on employee benefits issues for which a statewide approach would likely benefit public school employees and employers, compared with district-by-district action.

Established by the IBC, the Model Plan brings together a set of preferred products for Florida’s school employees’ supplemental retirement savings within 403(b) plans. Investment products and the companies that provide them have been thoroughly vetted to ensure fairness and transparency in fees and costs, as well as high-quality performance and services. They are continually monitored to maintain these high standards and values.

Within the Model Plan, employees can invest in annuities, mutual funds, or a combination of both through multi-product accounts that combine these registered products. You can choose the product type that best meets your individual circumstances and your investment preferences.

Yes. The Model Plan was designed to meet the supplementary retirement investment needs of all school employees. Because of the diversity of products available from Model Plan companies, participants will find options that meet their individual circumstances.

The Model Plan makes the investment decision less overwhelming and more manageable while maximizing the value to you.

When the Model Plan was established, all companies then offering 403(b) products in Florida’s school districts were invited to participate in the selection process. Some companies chose not to participate because they didn’t want to offer programs statewide, which is required by the Model Plan. Others felt their prices wouldn’t be competitive.

Ultimately, five companies earned the IBC’s seal of approval for inclusion in the Model Plan. These companies offer high-quality products and services at fair prices to 403(b) participants in Florida.

Yes. You choose the level of service you need from an investment plan provider. Total costs vary for specific products and services, but all investment options were vetted to ensure fairness and transparency in fees and costs, as well as high-quality performance and services.

Potentially. This is an important feature of the multi-product custodial account. PlanMember Services and Security Benefit offer hundreds of different mutual fund companies through their investment portfolios. Yours most likely is among them.